How to compare policies

Step one: normalise

Quotes are only comparable when the terms are identical. Set every quote to the same limits, the same deductibles, the same term or period, the same optional coverages.

Use an existing declarations page as the specification where you have one. A cheaper quote with lower limits is a different product, not a better price.

Step two: read the exclusions

Exclusions are where two similar-looking policies differ most, and they're the part nobody reads. This is where the actual product lives.

For each policy, find the exclusions section and ask what would have to happen for this policy not to pay. Then ask how likely that is for you specifically.

Step three: check what triggers payment

• What event does this pay on, in the contract's words rather than the brochure's?
• Are there waiting periods, and how many different ones?
• Is the full benefit payable immediately, or graded?
• Who receives the money, and can I change that?
• What's the process, and what proof is required?

Step four: check the company

Two free lookups. The NAIC complaint index tells you how often the insurer draws complaints relative to its size and what they're about. Financial strength ratings tell you whether the company can pay in the long run.

For anything you'll hold for years, both are worth the four minutes.

Step five: now look at price

With terms normalised, exclusions read and the company checked, the premium finally means something. At that point a genuine price difference is a genuine reason to choose.

And ask what happens at renewal, because the first-year price is not the price.

The questions worth asking of any policy

• What would have to happen for this not to pay?
• What isn't covered that I might assume is?
• Can the premium change, and under what circumstances?
• What happens if I miss a payment?
• How long do I have to change my mind after delivery?
• What does the claims process actually look like?